Rational Delivers Record Revenue Growth, Special Dividend

Narrow-moat Rational RAA reported 31% revenue growth, exceeding our estimates and management’s revised guidance provided at the end of September 2022. Price increases of 10% and the easing of supply chain constraints for electronic components, thereby accelerating deliveries on the group’s order book, supported its outperformance. We see plenty of runway ahead, which is consistent with management’s high-single-digit revenue growth guidance for 2023. We raise our fair value estimate to EUR 570 from EUR 540, which incorporates the group’s better-than-expected top-line performance as well as the spillover effect of already announced price increases. The shares appear fairly valued.

Rational’s strong pricing power compensated for raw material and energy inflation, supporting operating profit growth of 48% and EBIT margin expansion of 270 basis points to 23.2%. Investors have been rewarded with a dividend of EUR 11 and special dividend of EUR 2.50, taking the total dividend to EUR 13.50, an increase of 35% year over year.

Rational’s growth was impressive, despite a decline in sales across China due to coronavirus lockdowns. The region provides a large runway opportunity for the group, where the economy has reopened and penetration rates for combi-steamers are low. Rational will be launching a combi-steamer tailored to the Chinese market from 2025 onward, at a lower cost to encourage greater adoption of multipurpose cooking appliances. Rational’s order book is EUR 245 million, more than three months of visibility.